Union PFI deal to be tested on £300m Coventry hospital

Industry waits to see how agreement allowing ancillary workers to remain on NHS payroll works in practice.

health consortiums will this week be scrutinising the government's handling of a test-case PFI hospital contract after it conceded ground to the unions over staffing.

The agreement, which will allow hospital ancillary workers to remain employees of the NHS, even though managed by private consortiums, is to be tested at the £300m Walsgrave hospital in Coventy.

The unions say the agreement is essential to ensure that employment conditions are not eroded; contractors argue that it will push up the cost of hospital PFI schemes by at least 5%.

PFI consortiums will now wait until the Walsgrave scheme reaches financial close before deciding how to proceed with the management of their own projects.

A spokesperson for the Catalyst consortium, which includes Bovis Lend Lease, said: "We will review how to proceed with our deals once the Walsgrave hospital reaches its close."

Norman Rose, director of the Business Services Association, the trade body representing facilities managers, agreed that the deal would increase the cost of PFIs.

He said the risk factor involved in PFI hospital projects would be greater because companies would not have the same control over staff. Rose said: "The implication of this risk is that bidding costs could rise by 5% and it remains to be seen what the overall added cost would be."

The agreement between public services union Unison and the government, which was announced by health minister John Hutton on Tuesday, is expected to be finalised next week. Unison general secretary Dave Prentis said private firms had to be prepared to make smaller profits on PFI projects.

He said: "Construction firms are making excessive profits on PFI schemes. It is not acceptable that, only last week, Balfour Beatty and Amec announced profits on PFI deals of up to 18%."

Hutton said the deal would end the emergence of a two-tier workforce, which could have been created by private sector recruits working alongside NHS workers.